Copper prices hit a three-month high in November, making it an interesting time for traders to explore new opportunities. Let's delve into the factors behind this surge and what experts anticipate for the upcoming year.
To be honest, copper didn't have the best performance this year, especially compared to its counterparts like gold (XAUUSD) and silver (XAGUSD). However, a glance at the futures chart of these metals provides an overview of 2023 developments. Copper appears to be an outsider in this list.
Examining the copper chart and its augmentation reveals a consistent growth this fall, despite a minor correction on December 4. This positive trend is attributed to a combination of factors.
Market participants are well aware of this simple rule: when precious metals rise, the answer often lies in the US dollar. In other words, the USD and copper usually move in opposite directions, and this situation is no different.
Following the Fed's distinct signals that there's no immediate need for further interest rate hikes, the US dollar started to decline. Anticipation builds among market participants for the Federal Reserve to lower the key rate in the upcoming spring, impacting the USD in both the short and long term.
The weakening of the US dollar also allows various countries to purchase copper on more favorable terms, with China being a notable example. As the Chinese economy continues to recover and gain confidence, global demand for copper increases.
Simultaneously, concerns arise among investors regarding a potential shutdown of a major mine in Panama due to numerous environmental protests. This mine supplies approximately 1.5% of world volumes. Although this percentage may seem modest, the cumulative effect of these factors leads the market to consider that demand will surpass supply in 2024.
That’s why many experts are sure that the price of copper will remain relatively high, and the same may be true for other precious metals. However, it's crucial to remember that markets can change rapidly, emphasizing the need for thorough analysis before making any trades.
